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Taxation of Pilots and Cabin Crew
It can be difficult to understand the tax rules for pilots and cabin crew working internationally, for an airline based and headquartered abroad. There are some key factors that determine, to which country a person is taxable. Additionally, these factors determine, according to which rule a pilot or cabin crew should be taxed.
Three Key Questions Are:
- Where is the operating company (management headquarters), of the airline based?
- Is the aircraft used in international traffic?
- In which country is the pilot or cabin crew resident?
There are, of course, other personal circumstances that may affect the taxation of a pilot or cabin crew member working for a foreign airline. For example, the pilot’s or cabin crew’s fiscal status, number of days abroad and life interests, etc.
For the past few years, the Danish Tax Agency has had pilots as its area of control. This has resulted in significant changes, as well as restrictions, on the interpretation of rules for taxation of pilots working in international traffic for a foreign airline. The decisions from the Danish Tax Agency have contributed to negative tax consequences for the affected pilots.
If you have been offered a position with a foreign airline operating in international traffic; or you are currently employed by a foreign airline operating in international traffic, we advise you to seek personalized advice. As a starting point, you should look into which country has the right to tax, and whether you have been reporting your tax returns correctly and fulfilling your obligations to the Danish Tax Agency over the years.
Employee Benefits and Pensions
Another factor that pilots and cabin crew overlook in relation to their tax returns, are the staff benefits from their foreign employer. The most common employee benefits for pilots and cabin crew are meals, life- and health insurances. Please note that all employer-paid employee benefits are taxable in Denmark. We have seen foreign airlines utilizing the rules for tax-free meals according to the Danish tax rules. However, after the Danish Tax Agency’s control, they have not met the conditions for this, and the pilots have been taxed on all meals as part of their personal income. Please notice that there are specific accommodation rules for pilots and cabin crew.
For foreign pensions, even if they are privately drawn or employer-administered, there is a duty to provide information on these pension schemes to Denmark. We advise you to investigate which scheme your foreign pension belongs to, according the Danish tax legislation and simultaneously report this to the Danish Tax Agency.
Social Security
Social security can be difficult to deal with and it is especially difficult to find out, in which country you are socially insured. The rules are complicated and there are changes, as a result of the EU-regulations.
For pilots and cabin crew, who reside in Denmark and work as pilots or cabin crew in two or more EU-countries, the country in which the staff is home based is considered to be the country, in which they are socially insured. The home base is the place where the person in question normally commences and ends a period of service; and where the airline is not normally responsible for the accommodation of the crew member concerned.
However, there are some special rules for EEA-states, Switzerland and countries outside of EU, with which Denmark has entered into special agreements. For flights to other countries outside the EU, the home base rule may not be applicable; as here the authorities must decide amongst themselves using the special agreements, where the person must be socially insured.
It is the employee and employer, who have the responsibility to investigate where the employee is socially insured. We recommend that pilots and cabin crew ensure that they are socially insured in the right country. This can be achieved by contacting the responsible authority of the country of residence.
Contact us
You are more than welcome to contact us if you need advice or assistance with your tax return. We would like to have a talk about how we can help you and what solutions you may need.
If you wish to be contacted by SkatteInform State Authorized Auditing Partner Company (CVR: 35394206), you are welcome to use the contact form below. Your personal data will be processed in accordance with the Personal Data Regulation. You will be contacted in order to have your inquiry answered in the best possible way.